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Tuesday, 4 March 2014

Manufacturers leading foreign investment charge in Myanmar

YANGON -- Foreign direct investment in Myanmar in the year through March 2014 is forecast to nearly triple from the year before to around $4 billion, with money from foreign investors expected to lift economic growth.

Overseas investment in fiscal 2013 is expected to be the third largest since the country began publishing data in 1989. Textiles and other types of manufacturing account for half the total. Foreign direct investment in the 11 months through February totaled $3.6 billion, a 160% increase on the full-year figure for fiscal 2012, a state-run newspaper reported Saturday. The inflow of foreign money has been increasing since a revised foreign investment law was enacted in late 2012 that extends the period of corporate tax relief and land leases for overseas companies. Myanmar's FDI growth outpaced that of its neighbors in Southeast Asia last year, although from a much lower base. In Indonesia, for example, FDI grew 20% in 2013, while Thailand suffered a double-digit decline.

The robust growth is largely due to the takeoff in Myanmar's manufacturing sector. The share of manufacturing in the country's inward FDI rose to 50% in fiscal 2013 from 30% the previous year. Overseas investors are trying to cash in on opportunities in the textile industry, whose exports have been brisk since the European Union eased economic sanctions on the country last year. Foreign investment in Myanmar has traditionally been focused on electricity and natural resources such as natural gas. But the government of President Thein Sein has been working to attract manufacturers because they create a lot of jobs. Those efforts appear to be paying off and the country's industrial structure is changing.

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Investment in the telecommunications industry accounted for 20% of total FDI in 2013. Major telecom operators from Qatar and Norway are expected to roll out mobile phone services in Myanmar this year, and they are building base stations and other infrastructure. Investment in tourism is also solid, as the country welcomes a growing number of overseas visitors.

Despite the strong growth in FDI in 2013, the figure fell far short of the record $20 billion set in fiscal 2010, when Chinese firms launched many projects in the power generation sector, and the $6.1 billion Myanmar pulled in in fiscal 2005, when a Thai company made a big investment in natural gas development.

Overseas investment is likely to keep growing in the next fiscal year, in part because construction is due to start on the Thilawa industrial complex, which is being jointly developed by Japanese and Myanmarese companies in a special economic zone near Yangon.

The World Bank predicts that Myanmar's gross domestic product will expand 6.8% in real terms this fiscal year, posting the second-fastest growth among major Southeast Asian countries, after the Philippines.